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Can you sell your business for a profit? (Part 2)

Thank you to my valued audience for your positive feedback on my original article “Can you sell your business for a profit?” Due to the overwhelming popularity of the article and the requests from several readers to make this a 2-part series I am happy to add this second article.

The Tactical Work of Building a Business That Can Be Sold

In the first part of this article, we talked about the end result, selling your business. Now we will discuss what you must do tactically to build a business that someone else wants to buy.

Producing predictable results

How do you create predictable results from a business?

The answer is found in the systems that you create for your business.

The business must produce predictable results for the following stakeholders in your business:

Customers

Employees

Suppliers

Lenders/Investors

Business Owner

The customers must know exactly what your business will do for them and come to trust your business to deliver the same result each time they spend money with your business.

The employees must know exactly what they are expected to do and what benefit that will bring to them and everyone else.

The suppliers must come to view your business as a valued customer, someone that they can count on.

The lenders and investors must see a predictable return on their investment.

You as the business owner need the business to operate profitably and under control, so you can count on the business to provide you with what you need and want from it.

How do you do that?

To establish the predictability of your business you must first create the systems, then test those systems, and finally, measure the results your business systems produce.

This will provide you with a baseline.

Regardless of who runs the system then, the business will produce this baseline, an average result that can be measured and then reported. From there you can make incremental improvements to the systems and over time, gradually increase both the predictableness and the quality of the results.

The question you must ask yourself is:

Can I create systems in my business that are simple to follow, repeatable, easy to measure, and will it appeal to a large enough group of people?

If the answer is “yes”, then you can move on to the next component of a great business.

If the answer is “no”, then I recommend that you revisit the products or services that you intend to offer your ideal customer.

Sometimes the problem is that you are trying to do too many things.

For example, when I was running my contracting business I was trying to do interior and exterior work.

This turned into a big mistake.

What I ended up doing was eliminating the interior work.

Then I examined what we were really good at with exteriors. I then reduced the services I offered from 8 to 6, to finally 4.

Four services I could handle because it ended up being a service for each season. With only one service to focus on at a time, in one year, I had systemized all four services.

Can you do the same?

Once you reduce what you offer to a manageable amount, revisit if you can now answer “yes” to our question:

Can I create systems in my business that are simple to follow, repeatable, easy to measure, and will it appeal to a large enough group of people?

If the answer is still “no” the next place I would focus my attention on is whom I was planning to offer my products or services to.

Once again when we did this with my contracting business, we found that 80% of our work was coming from Property Managers and Residential Home Owners.

Further analysis helped us to create a profile that perfectly described exactly what kind of Property Managers and what kind of Residential Home Owners we wanted to work with.

Even with this reduction in services and customers, we found that there was still more work out there than we could ever handle. By focusing our efforts, we discovered that our business was very viable and that we could create systems that produced predictable results.

Operating Independent of You, the Owner

If your business needs you, you will never be able to make it scale and no one will ever want to buy your business because as soon as you leave, your business doesn’t exist.

Your business is not in existence to provide you with a job. Your business is an entity all on its own and it has its own set of needs and obligations. Remember the stakeholders of a great business are your customers, employees, suppliers, lenders, investors and absolutely last, you the owner.

Your business must offer your customers something that they need, or want, and are willing to pay for and you must develop a set of systems that deliver it predictably and profitably.

Your employees need a business that delivers predictable and profitable results otherwise it won’t last and they will need to find another job.

Your suppliers need customers that buy regularly, pay on time, and help them grow their business.

Your lenders and investors need a business that makes money and will give them a return on their investment otherwise they need to find another investment.

If you are building a business that is based on you and you alone it is doubtful if not completely impossible to give all those people what they need. In fact, if you try to give all those people what they need you will be torn to pieces emotionally, financially, and even physically!

That is why 96% of businesses fail in the first 10 years. Thousands of entrepreneurs try to give all those people what they need and want by emptying themselves and they end up failing.

It’s a recipe for disaster and yet it is a recipe that so many insist on trying to follow.

When I built my contracting business that I sold in 2016 we built a systems-centric business that eventually worked so well we were able to move 1000 kms (600 miles) away and it continued to operate exactly as we had built it to operate. Over the years this was such a gift. If you would like to learn more about the ways it positively impacted my life please listen to the interview I did with Aaron Scott Young on the Unshackled Owner podcast.

Scale (Growth)

Small business owners often struggle financially. The business that is centered on the owner will hit a growth limit.

You may hire a few employees and your business will grow but not enough to allow you to step out of the business and become a leader that is working “on the” business full-time.

The organic growth that is initially experienced stops. It then seems like no matter how much growth you have experienced there is never enough money.

In my business, we found initially that the best we could accomplish was for me to work part-time in the business and part-time on the business. We were constantly having to invest more money into the business to keep the growth pattern going. This resulted in an accumulation of personal debt because my wife and I were the business.

What is the solution?

Once we understood that to build a great business we needed to start over and build our business to produce predictable results and operate without us then we could break the cycle. We began to understand that in our contracting business one truck with two employees could produce $100,000 dollars a year in sales and generate $30,000.00 a year in gross profit. Not enough to even run our business never mind pay us a wage that we could support our family on.

Once we applied scale to the equation the solution became clear. Increase the number of trucks and employees and we would hit a critical financial benchmark. The business would pay for itself and then would pay for our livelihood.

But how do you do that?

The secret to scaling is all the way back at the beginning; building the first one and replicating it repeatedly. The scalability of the business is a fundamental component of whether it becomes a great business.

Now can you see why a business that delivers a predictable result is so important?

Can you see why the business must operate without you the owner?

How without those two components in place, you will never scale and without scalability, you will never create a great business?

The secret to scaling is not being big, it’s starting small, and “one brick at a time” building something that once complete can grow.

In Conclusion

A great business is a business that can produce predictable results, operate independently of its owner, scale, and be sold for a great profit. The path to greatness in my case was to develop a blueprint that I used to build my great business and then sell my business for a great profit.

This blueprint and the introductory first 2 lessons of this new course is packed with valuable information that will help you to build a great business. You will receive the blueprint we use in the course as a PDF download and then in the first two lessons of the course you will also receive 1 introductory video, 4 videos that discuss the 4 components of a great business in more detail, 2 assignments and 2 quizzes that will reinforce everything that you have read in this article.